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Prominent cryptocurrency executives are warning that California’s proposed 5% tax on billionaires could backfire spectacularly, driving wealthy residents and their capital out of the state rather than funding the healthcare and social programs it promises to support.
The 2026 ballot initiative would impose an annual levy on net wealth exceeding $1 billion, including unrealized gains—a provision that Kraken co-founder Jesse Powell and other industry figures say represents an unprecedented overreach that will accelerate California’s exodus problem.
Under the initiative, formally titled the 2026 Billionaire Tax Act, California would assess a 5% annual charge on wealth exceeding $1 billion, payable either as a lump sum or over five years with interest.
Critics within the crypto sector say the billionaire wealth tax would be unprecedented in scale and complexity, particularly because it targets unrealized gains.
Kraken co-founder Jesse Powell argued that the measure would be counterproductive, predicting a swift reaction from those it targets.
“I promise you this will be the final straw. Billionaires will take with them all of their spending, hobbies, philanthropy and jobs. Solve the waste/fraud issue,” — Jesse Powell, Co-founder, Kraken.
Powell’s remarks echo a broader concern among industry leaders that the billionaire wealth tax could shrink California’s tax base rather than expand it, as wealthy individuals shift residency and investment activity to other jurisdictions.
Questions around capital mobility have become central to the opposition case against the billionaire wealth tax. Castle Island Ventures founding partner Nic Carter said the proposal underestimates how easily capital can move in a globalized financial system.
“I generally like Ro and have interacted with some of staff who have always been fantastic, but I do wonder — have they done an analysis of capital mobility in response to wealth taxes?” — Nic Carter, Founding Partner, Castle Island Ventures.
Carter compared the signal sent by one-time wealth taxes to sovereign default risk, suggesting it could prime investors to expect further levies.
“It seems to me that capital is more mobile than ever, and one time wealth taxes are a signal to capital — like a sovereign default — that more can be expected in the future,” — Nic Carter, Founding Partner, Castle Island Ventures.
Those warnings are reinforced by Bitwise CEO Hunter Horsley and ProCap BTC chief investment officer Jeff Park, who have both publicly questioned whether the billionaire wealth tax would ultimately harm California’s competitiveness relative to other innovation hubs.
Critics of the billionaire wealth tax have also pointed to international examples where similar policies fell short of expectations. Fredrik Haga, co-founder and CEO of on-chain data platform Dune, cited Norway’s experience with taxes on unrealized gains as a cautionary tale.
“Friendly reminder to California: Taxes on unrealized capital gains have led to more than half of the wealth held by Norway’s top 400 taxpayers moving abroad,” — Fredrik Haga, Co-founder and CEO, Dune.
Haga added that while Norway became more equal on paper, the overall economic outcome was negative, raising doubts about whether the billionaire wealth tax could sustainably fund social programs without broader economic costs.
Skepticism has also been fueled by concerns over how public funds are managed. A December audit from the California State Auditor highlighted cases of unaccounted-for or poorly justified spending, which opponents say weakens the case for raising new revenue through the billionaire wealth tax.
“But what Ro has a plan for is not pulling the fire alarm and fixing this. Rather what he’s been spending time on is a new private citizen asset confiscation to have more money for the government. Politicians have long forgotten their role is to be a servant,” — Hunter Horsley, CEO, Bitwise.
Despite the backlash, supporters of the billionaire wealth tax remain firm. US Representative Ro Khanna, a Democrat representing California’s 17th Congressional District, has defended the proposal in a series of social media posts, arguing that investments in childcare, housing and education would strengthen long-term innovation.
As the initiative moves toward a potential appearance on the November 2026 ballot, the billionaire wealth tax is shaping up to be a defining issue for California’s economic future, pitting redistribution goals against warnings of capital flight and reduced competitiveness.
